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Crif analysis: More and more restaurants threatened with bankruptcy

Is the restaurant industry facing a wave of insolvencies? The return to the normal VAT rate of 19 percent does not make the situation any easier for businesses.

Is the restaurant industry facing a wave of insolvencies?.aussiedlerbote.de
Is the restaurant industry facing a wave of insolvencies?.aussiedlerbote.de

Crif analysis: More and more restaurants threatened with bankruptcy

The number of businesses at risk of bankruptcy in the catering industry is growing - and industry observers expect more insolvencies due to the return to the normal VAT rate. "The increase in VAT will further exacerbate the situation, especially for restaurants that are already struggling financially," explained Frank Schlein, Managing Director of the information service provider Crif in Germany, on Wednesday.

According to a Crif analysis, 15,069 restaurants, pubs, snack bars and cafés in Germany were at risk of insolvency in mid-November. This corresponds to 12.6 percent of the almost 120,000 businesses analyzed. In August, the figure was 11.9 percent. In January 2020 - before the coronavirus pandemic - the number of catering businesses at risk of insolvency was 12,662, or 10.7 percent.

Rising prices for energy and food as well as staff shortages have been causing the industry problems for months. Now, the coalition government wants the VAT on food in the catering industry, which was reduced from 19% to 7% during the coronavirus pandemic, to be raised to the normal rate again on January 1, 2024.

More insolvencies expected next year

There is a clear dichotomy in the catering industry, Schlein explained: "Companies that are in a stable financial situation have further strengthened their resilience. On the other hand, catering businesses that were already struggling with problems are increasingly facing the risk of insolvency." For 2023, Crif is currently forecasting 1,600 insolvencies in the food service industry, 36.5% more than in 2022. "Insolvencies in the food service industry will continue to rise in the coming year," Schlein predicted.

The increase in taxes, specifically the return to the normal VAT rate, is projected to contribute to more insolvencies in the hospitality industry, which is already facing financial challenges due to rising prices for energy and food, staff shortages, and the continuing impact of the coronavirus pandemic. The hospitality industry, already suffering from a high number of businesses at risk of insolvency, is expected to see an increase in insolvencies next year, with Crif predicting 1,600 insolvencies in the food service industry for 2023.

Source: www.dpa.com

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